The organization of supplier networks: Effects of delegation and intermediation

Dilip Mookherjee, Masatoshi Tsumagari

Research output: Contribution to journalArticle

51 Citations (Scopus)

Abstract

In a one-principal two-agent model with adverse selection and collusion among agents, we show that delegating to one agent the right to subcontract with the other agent always earns lower profit for the principal compared with centralized contracting. Delegation to an intermediary is also not in the principal's interest if the agents supply substitutes. It can be beneficial if the agents produce complements and the intermediary is well informed.

Original languageEnglish
Pages (from-to)1179-1219
Number of pages41
JournalEconometrica
Volume72
Issue number4
DOIs
Publication statusPublished - 2004 Jul

Fingerprint

Delegation
supplier
profit
organization
Adverse Selection
Collusion
Substitute
Profit
Intermediation
Supplier network
Network effects
Complement

Keywords

  • Auctions
  • Collusion
  • Delegation
  • Hierarchy
  • Intermediation
  • Principal-agent
  • Procurement

ASJC Scopus subject areas

  • Mathematics (miscellaneous)
  • Statistics and Probability
  • Economics and Econometrics
  • Social Sciences (miscellaneous)

Cite this

The organization of supplier networks : Effects of delegation and intermediation. / Mookherjee, Dilip; Tsumagari, Masatoshi.

In: Econometrica, Vol. 72, No. 4, 07.2004, p. 1179-1219.

Research output: Contribution to journalArticle

@article{884fbe556c8442dbbf7c0145243093bb,
title = "The organization of supplier networks: Effects of delegation and intermediation",
abstract = "In a one-principal two-agent model with adverse selection and collusion among agents, we show that delegating to one agent the right to subcontract with the other agent always earns lower profit for the principal compared with centralized contracting. Delegation to an intermediary is also not in the principal's interest if the agents supply substitutes. It can be beneficial if the agents produce complements and the intermediary is well informed.",
keywords = "Auctions, Collusion, Delegation, Hierarchy, Intermediation, Principal-agent, Procurement",
author = "Dilip Mookherjee and Masatoshi Tsumagari",
year = "2004",
month = "7",
doi = "10.1111/j.1468-0262.2004.00529.x",
language = "English",
volume = "72",
pages = "1179--1219",
journal = "Econometrica",
issn = "0012-9682",
publisher = "Wiley-Blackwell",
number = "4",

}

TY - JOUR

T1 - The organization of supplier networks

T2 - Effects of delegation and intermediation

AU - Mookherjee, Dilip

AU - Tsumagari, Masatoshi

PY - 2004/7

Y1 - 2004/7

N2 - In a one-principal two-agent model with adverse selection and collusion among agents, we show that delegating to one agent the right to subcontract with the other agent always earns lower profit for the principal compared with centralized contracting. Delegation to an intermediary is also not in the principal's interest if the agents supply substitutes. It can be beneficial if the agents produce complements and the intermediary is well informed.

AB - In a one-principal two-agent model with adverse selection and collusion among agents, we show that delegating to one agent the right to subcontract with the other agent always earns lower profit for the principal compared with centralized contracting. Delegation to an intermediary is also not in the principal's interest if the agents supply substitutes. It can be beneficial if the agents produce complements and the intermediary is well informed.

KW - Auctions

KW - Collusion

KW - Delegation

KW - Hierarchy

KW - Intermediation

KW - Principal-agent

KW - Procurement

UR - http://www.scopus.com/inward/record.url?scp=3142706731&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=3142706731&partnerID=8YFLogxK

U2 - 10.1111/j.1468-0262.2004.00529.x

DO - 10.1111/j.1468-0262.2004.00529.x

M3 - Article

AN - SCOPUS:3142706731

VL - 72

SP - 1179

EP - 1219

JO - Econometrica

JF - Econometrica

SN - 0012-9682

IS - 4

ER -